02/08/2016

cti2015header-morning comments web

Market Update

  • US tsys lower, curve bear steepening as longs underperform, US 10Y 1.56 (+3.4bps), despite another weak session for European equities (-1.5%) with and the Nikkei -1.5%. The RBA cut rates to a record low 0.50%.Main focus overnite was continued rout in Japanese govt bonds after weak 10Y JGB auction. Reuters also reported that the Japanese govt is set to issue ‘several hundred billion’ in 40 year JGBs to fund Abe’s stimulus package. Fed Kaplan saying there is evidence that inflation is moving towards the Fed’s 2.0% goal, and that consumer spending is strong. European govt bonds lower after selloff in JGBs – also rumors ECB may slow purchases this month. GOCs sharply lower, catchup mode after yesterday’s losses in US, erasing Friday’s post GDP rally and 10s ~6bps weaker on the curve. Provis opening unch at new lows.

 News headlines                                                                                                     

  • European shares hit two-week lows, yen rises as Japan backs stimulus (Reuters) European stocks fell to two-week lows on Tuesday, dragged down by banks, while the yen rose against the dollar and government bonds sold off after Japan’s cabinet approved a fiscal stimulus package to revive the flagging economy. Oil fell again, with U.S. crude dipping below $40 a barrel as a supply glut weighed on prices.
  • Australia Rejoins Global Disinflation Fight With Record Low Rate (Bloomberg) How the mighty have fallen. Australia’s record low interest-rate following Tuesday’s cut underscores the demise of its economic exceptionalism: swept up in a wave of global disinflation, policy makers had little choice but to step in line with international peers as a strengthening currency threatens to push prices lower still. It’s a far cry from five years ago when the benchmark rate was a developed-world high 4.75 percent and the local dollar was worth more than the greenback as a mining investment bonanza went into overdrive.
  • Yen Surges to Three-Week High as Japan Stimulus Underwhelms (Bloomberg) The Japanese yen appreciated to the strongest level in three weeks against the dollar as extra spending announced by the government amounted to only a small part of a headline number flagged by Prime Minister Shinzo Abe last week. The currency climbed against all of its 16 major peers after Japan’s government announced 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, as Abe seeks to bolster the economy without abandoning targets for improving fiscal health.
  • Oil takes breather from losses but oversupply concerns remain (Reuters) Oil edged higher on Tuesday after falling by up to 10 percent in just one week, but investors remained concerned about oversupply weighing on prices. Global benchmark Brent crude was trading up 49 cents at $42.63 a barrel at 1031 GMT (0631 EDT). U.S. West Texas Intermediate (WTI) crude was up 38 cents at $40.44 a barrel, after briefly dipping below $40.
  • Ruble Gains With Oil as Exporters Convert Dollars for Dividends (Bloomberg) The ruble gained as oil rebounded after falling into a bear market and Russian companies sold dollars to prepare for dividend payments. The currency of the world’s largest energy exporter rose 0.4 percent to 66.60 per dollar by 2:45 p.m. in Moscow. Brent crude increased 1.6 percent after Bank of America Merrill Lynch said on Tuesday crude’s 15 percent decline in the past month represents a good buying opportunity.
  • Volkswagen Seeks Dismissal of U.S. Investor Class-Action Lawsuit (Bloomberg) Volkswagen AG asked a U.S. district court to dismiss a class-action lawsuit filed on behalf of investors, arguing the tribunal can’t hear disputes over shares trading mostly in Germany. The filing urges the judge in the court for the northern district of California to rely on a 2010 landmark Supreme Court ruling that says litigation over shares traded outside the U.S. can’t be heard in the country, VW said Tuesday in an e-mailed statement. Among the cases VW cited is also one by its holding company Porsche SE, which won dismissal of a $2 billion hedge fund case filed in the Manhattan U.S. district court.
  • Credit Suisse, Deutsche index exclusion another blow to European banks (Reuters) Two of Europe’s biggest banks – Credit Suisse (CSGN.S) and Deutsche Bank (DBKGn.DE) – will be dropped from an index of Europe’s top 50 blue-chip companies next week in a further blow to the embattled sector. For Deutsche Bank, it will be the first time since 1998 that it will no longer be a member of the STOXX 50 .STOXX50.

 

Overnight markets  

  • Overview: US 10yr note futures are down -0.4353% at 132-7, S&P 500 futures are down -0.18% at 2160.5, Crude oil futures are up 1.35% at $40.6, Gold futures are up 0.81% at $1370.6, DXY is down -0.47% at 95.262.

US Economic Data

  • 8:30 AM: Personal Income, June, 0.2%, est. 0.3% (prior 0.2%)
    •      Personal Spending, June, 0.4%, est. 0.3% (prior 0.4%)
    •      PCE Core, m/m, June, 0.1%, est. 0.1% (prior 0.2%)
    •      PCE Core, y/y, June, 1.6%, est. 1.6% (prior 1.6%)

 Canadian Economic Data

  • 9:30 AM:  RBC Canadian Manufacturing, July, (prior 51.8)

 

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230